June 4, 2021
1. Decisive weekend for Mexico – Elections
On Sunday, June 6th, Mexicans will go to the polls in one of the most important elections in Mexico – decisive for the future of the country, despite not being presidential elections. Currently, Morena has the absolute majority in the Chamber of Deputies with 66% of the seats. According to El País, this number could fall to 42%, so the president’s party will need to create strategic alliances with other parties to continue with its 4T agenda.
In case of obtaining an absolute majority in congress, this date may mark a second wave of reforms that would continue with the distribution of resources towards the current administration’s projects, such as social programs and infrastructure and energy projects; this could affect foreign investments and generate uncertainty in the market. On an economic level, JP Morgan indicates that there is a chance for the peso to depreciate towards MXN $20.35 per dollar, since uncertainty will continue about what will happen during the second half of López Obrador’s term.
2. Companies will face administrative and fiscal sanctions if they fail to comply with outsourcing measures
As a result of the reform that regulates outsourcing in Mexico, the Ministry of Labor and Social Welfare (STPS) published the bases for the registration of subcontractors in the Public Register of Contractors of Specialized Services and Specialized Works. The compliance period expires on July 23, 2021, and tax changes will begin on August 1st.
With the beginning of this new outsourcing framework, companies must comply with fiscal and administrative requirements, or face sanctions by the Secretariat of Labor, the Mexican tax service (SAT) or, an audit by the Unit of Financial Intelligence (UIF) of the Ministry of Finance and Public Credit. Among the most serious sanctions for carrying out subcontracting practices under terms prohibited by the labor authority include fines of up to MXN $4.5 million (USD $225,785) or charges of tax fraud.
3. Banxico foresees an increase in GDP and inflation
According to the OECD, energy prices drove inflation in Mexico during April, positioning it as the second country with the highest inflation among all its member countries, increasing 3.3% annually. In contrast, Banxico’s quarterly report estimates that the country’s inflation for 2021 will be 5%.
Among other economic indicators, the forecasts for GDP growth range between 5 and 7% and the forecast for the Mexican peso’s value to the U.S. dollar stands at $20.50 for this year. Similarly, the Central Bank reported that remittances amounted to USD $4.05 billion, which represents an annual increase of 39.1% during April – the highest such increase in 18 years.
Forbes: Analistas suben pronóstico de inflación a 5% para 2021: sondeo de Banxico.
El Economista: Inflación de México, la segunda más alta entre países de la OCDE
El Financiero: Ve Banxico PIB de hasta 7%… y más inflación y ¡Remesotas Se disparan 39%, su mayor alza desde 2003.
4. Despite a limited budget, INE presents ballots for popular consultation
Despite having a deficit of approximately MXN $1.5 billion (USD $75.3 million) for the organization of the consultation promoted by President López Obrador, the General Council of the Institute approved the design of the ballot and its braille form for the elections. As part of the counting process, the municipality or mayor’s office will be placed on the back of the ballots.
The consultation will be held on August 1st, 2021, and at least 40% of registered voters must participate for it to be binding. Citizens will be asked if they agree to carry out “a clarification process” of the decisions made in the past years by political actors.
5. Mexico arises as the largest agricultural exporter to the U.S.
The United States Department of Agriculture (USDA) estimated Mexican agri-food exports at USD $31.5 billion for the 2020-2021 cycle, which represents a year-on-year increase of 7.1%. With this, Mexico stands as the largest agri-food exporter to the United States in 2021, followed by the European Union in second place and Canada in third place. Mexico’s chief exports to its northern neighbor includes beer, avocado, tomato, tequila, and blackberries. On the other hand, U.S. agricultural exports to Mexico are valued at USD $19.5 billion, a year-over-year increase of 8%, positioning Mexico as the third largest destination for U.S. agricultural exports after China and Canada.
Estimates from the Agricultural Markets Consultant Group (GCMA) indicate that the Mexican primary sector will grow 2.2% annually and that the agricultural GDP will be 3.6%. Likewise, it expects the tobacco and beverage industries to grow rapidly in the coming months.
El Economista: México se afianzará en agromercado de EU en 2021.